Appetite For Disruption

Wal-Mart Exclusives Redux

The NY Times chimes in with more on the general trend at Wal-Mart for their artist-specific exclusive.

Some further thoughts - from an artist's perspective.  With all due apologies to the Coalition of Independent Music Stores (CIMS) - who are doing a fantasic job waving the banner of the traditional music retailer - has music retail been so eviscerated that we no longer care where we buy our music from?  If that is the case - and I believe that it is - then labels and artists need to strategize whether releases need to be marketed to a wide swath of retailers, or just to a single retailer, to garner the proper sales impact.

In the world of "alternative distribution" labels are seeking to place their commercial product into so-called "non-traditional retail."  They seek to get chains to buy a few hundred or a few thousand copies of CD releases which are also marketed to traditional record retail brands.  But hasn't the recent history of Wal-Mart, Best Buy, and Target shown us the key to getting the most out of a retail partner is to get that partner to double down and commit to an exclusive that retailer needs to provide marketing for?

There is a downside to all these exclusives.  Some people just don't wish to go to Wal-Mart to shop for music because they want a more memorable music shopping experience.  They want to be able to browse through many more CD titles than Wal-Marts stock.  But artists are saying to the consumer: "I appreciate that you may cherish a different kind of music purchasing experience, but I just want to get my record out to a mass audience with as much marketing and as cheaply to you, the fan, as possible.  I care less about your music-buying experience than in your 'buying MY music experience.'  Wal-Mart delivers the best value to you on that front."

We all know the "long tail" can't be replicated at brick-and-mortar retail.  The question is now: are retailers (figuratively) cutting off most of the body and selling just the head, the top tier of marketable artists?  Is this the trend which will leave most music shoppers left with no physical place left to shop for even basic CD product selection?  Will Amazon win with these music fans just due to competitive atrition?

Wal-Mart Strikes Again - AC/DC Exclusive

Retailers everywhere - those who merchandise music and those who don't - take note - if you want to include among the ranks of your customers fans of The Eagles, AC/DC, Journey, Genesis, and Bryan Adams - kiss that thought goodbye.  Because Wal-Mart, long rumored to be reducing their footprint in physical CD sales, has wrapped up all of these artists to sell their current or future CD releases exclusively at Wal-Mart.

First up, and the biggest coup for Wal-Mart was The Eagles, one of the best-selling groups of all-time, a group who had not released an album in close to 30 years.  Wal-Mart secured an exclusive on their new album and has sold (according to reports) over 3 million copies of Long Road Out of Eden.

Bryan Adams followed with a U.S. territory exclusive in May.

Journey just released their new album via Wal-Mart this week.

This week Wal-Mart partners with Genesis for an exclusive release of a 3-DVD set.  I love this quote from genesis keyboardist Tony Banks:

"Wal-Mart puts 100,000 of this DVD out there and feels like it can sell that many, which I think will be an awful lot better than the last few things we've done," Banks said. "You have to look at it that way."

And now, another superstar joins the Wal-Mart exclusive ranks, none other than hard rock powerhouse AC/DC (subscription required - link to Reuters/Yahoo here).

So, while record retail is tanking, and Wal-Mart itself, as well as retailing giants Best Buy and Target shrink music floor space... while Borders closes stores and puts itself up for sale... while Transworld continues to shrink shelf space devoted to music... while Handleman gets out of the music merchandising and fulfillment game altogether... Wal-Mart is still cleaning everyone's clock by locking up the TALENT people spend money on in the CD category.  I know Target has done a few exclusives too, but their profile is much smaller.  Best Buy - with their previous Rolling Stones and Elton John DVD exclusives - has also stepped up to the plate before.  Starbucks Coffee Company's Starbucks entertainment division signed record deals with Paul McCartney, Joni Mitchell, James Taylor, and others, but those releases were also released through normal record retail channels.  But Wal-Mart is very savvily locking up the acts that will make customers drool with anticipation over - will a Guns 'N' Roses deal for Chinese Democracy be next... if Axl ever delivers the record?

So my blunt question to all the retail chains out there, whether you be a mass merchant, supermarket chain, specialty retail chain, or regional or national department store is this: WHEN ARE YOU GOING TO STEP UP AND LEARN THE LESSON WAL-MART IS TEACHING?  That lesson is simply this: you need not reinvent the wheel by offering up an innovative product to help drive people into your stores.  You do not need to invest in the "next big thing" when there are major known quantities with brand equity and customer/fan loyalty you can tap into - who have specific relevance for your retail brand.  But you do have to be bold and act!  You have to get in the game.  You have to realize physical music product - CDs - can still boost traffic and get new customers into your stores.

How many Eagles and AC/DC fans do you think there are?  MILLIONS!  How many times have people walked into other stores merchandising music and asked for the Eagles CD, only to be told that it is available exclusively at Wal-Mart?  How many people who don't frequent Wal-Mart often - or EVER! - were compelled to purchase that Eagles CD at a Wal-Mart location or from Walmart.com?  How many Wal-Mart shoppers who frequent the store often feel that much more loyal to the Wal-Mart brand?

Now ask this question: when is YOUR RETAIL BRAND going to use the power of music to elicit that kind of a reaction in consumers?  Being daring doesn't mean being stupid.  Even Wal-Mart didn't commit to more than 100,000 copies on the Genesis DVD.  Decisions about merchandising an exclusive album of new material from an artist require a solid grounding in the landscape of the music business, but, more importantly, a clear picture of one's own retail business, specifically:

• Who is the brand's core consumer?  What can offering an album exclusive bring to these core consumers - and what NEW consumers will this exclusive seek bring into the chain's stores?
  What is a reasonable minimum "guarantee" of units your chain would commit to on a one-way, non-returnable basis to get an album exclusive?
• What types of marketing efforts can your brand provide to support such an album exclusive effort?  Can you market the product via the following channels: brand web site, CRM efforts, print and/or broadcast advertising, mobile marketing, PR, in-store marketing and merchandising, store-level mangerial and associate support, operations and logistics, and direct marketing?
• What can the artist's marketing offer your brand as you embark together on a mutually beneficial relationship?  Does the artist tour regularly?  What is their online/mobile marketing strategy?  How can the artist incorporate their partnership with your retail brand into their radio promotion efforts?  Are there other touchpoints where there are synergies (i.e. Does the artist shop for themselves or for their family at your chain?) that can be addressed?
• Who is your brand talking to to initiate these deals with artists?  More than ever - veteran artists with strong followings are cutting their ties to major labels and launching their own, independent labels.  Younger artists trying to work outside the major label system are also hungry to be given a chance at these types of deals - and would probably accept much lower unit guarantees and retail brand financial commitment to do so.  Each retail brand needs to decide what their goals are in approaching an artist for a deal like this.  Is it to prove that the brand is a relevant lifestyle choice for a particular demographic?  Is it to purely drive in increased foot traffic?

But these questions, and their answers, are brand-specific.  Do your brand a favor and start asking some of them.  Or just sit back and watch Wal-Mart continue to eat your lunch.  There is no reason for a retail brand of 100+ stores to think "doing a music exclusive is out of our company's reach or scope."  Latch on to the incredible passion found in your consumers.  Discover what they are passionate about and deliver that.  It doesn't matter if you're a specialty fashion retailer or a quick serve restaurant - the right music can drive traffic and profits and get your brand closer to "top of mind" in the consumer's brain and emotions.

E-commerce Sales of Physical Product - Revisited

As I mentioned in my last post - sales of physical CDs were up 2.4% at E-commerce sites last year.  E-commerce sites can offer up wider selection of product, allow customers to listen to audio clips of tracks, and peruse editorial and customer reviews of the album.  What the E-commerce experience lacks in immediate customer gratification it gains in terms of ease of shopping experience.

Yet sales of albums at E-commerce sites represent just 6% of overall album sales.  For labels with huge catalogs facing further consolidation of record retail floor space E-commerce sites represent the last best hope for the compact disc.  So where is the great marketing effort on the part of the major labels, the RIAA, and independent labels to drive customers online to purchase physical product.  This does not mean shunning label retail partners.  So many major music retailers have online sites which sell music as well.

But it also broadens the number of accounts the distribution companies ought to be targeting to sell physical product (and digital music as well).  So many "non-traditional" retailers operate E-commerce operations.  Why not get these accounts to test the viability of music sales via their web site?  How can the labels get these retailers to give them visbility on their site?

The point is this: in this area where the labels have a growth story to sell we hear little from the industry touting this success.  Now is not the time to play possum.  Now is the time to flaunt your plumage like a peacock and go out and convert the non-believers.  CDs, especially catalog and deep catalog in this current market, need to be championed.  Get out there and grind it out!